Stock Analysis

A Look At The Fair Value Of Dangee Dums Limited (NSE:DANGEE)

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Key Insights

  • Using the 2 Stage Free Cash Flow to Equity, Dangee Dums fair value estimate is ₹5.33
  • Dangee Dums' ₹4.62 share price indicates it is trading at similar levels as its fair value estimate
  • Peers of Dangee Dums are currently trading on average at a 357% premium

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Dangee Dums Limited (NSE:DANGEE) as an investment opportunity by projecting its future cash flows and then discounting them to today's value. This will be done using the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.

We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model.

The Calculation

We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:

10-year free cash flow (FCF) forecast

2026202720282029203020312032203320342035
Levered FCF (₹, Millions) ₹46.8m₹50.8m₹54.8m₹59.0m₹63.4m₹67.9m₹72.7m₹77.8m₹83.1m₹88.9m
Growth Rate Estimate SourceEst @ 9.28%Est @ 8.52%Est @ 7.99%Est @ 7.62%Est @ 7.36%Est @ 7.18%Est @ 7.06%Est @ 6.97%Est @ 6.91%Est @ 6.86%
Present Value (₹, Millions) Discounted @ 13% ₹41.5₹40.0₹38.3₹36.5₹34.8₹33.1₹31.4₹29.8₹28.3₹26.8

("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = ₹341m

We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (6.8%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 13%.

Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = ₹89m× (1 + 6.8%) ÷ (13%– 6.8%) = ₹1.6b

Present Value of Terminal Value (PVTV)= TV / (1 + r)10= ₹1.6b÷ ( 1 + 13%)10= ₹480m

The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is ₹820m. The last step is to then divide the equity value by the number of shares outstanding. Compared to the current share price of ₹4.6, the company appears about fair value at a 13% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent.

dcf
NSEI:DANGEE Discounted Cash Flow October 11th 2025

The Assumptions

Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Dangee Dums as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 13%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

View our latest analysis for Dangee Dums

SWOT Analysis for Dangee Dums

Strength
  • Debt is well covered by cash flow.
Weakness
  • Interest payments on debt are not well covered.
Opportunity
  • Has sufficient cash runway for more than 3 years based on current free cash flows.
  • Current share price is below our estimate of fair value.
  • Lack of analyst coverage makes it difficult to determine DANGEE's earnings prospects.
Threat
  • No apparent threats visible for DANGEE.

Looking Ahead:

Valuation is only one side of the coin in terms of building your investment thesis, and it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Dangee Dums, we've compiled three relevant aspects you should further research:

  1. Risks: Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Dangee Dums (at least 1 which is significant) , and understanding these should be part of your investment process.
  2. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
  3. Other Top Analyst Picks: Interested to see what the analysts are thinking? Take a look at our interactive list of analysts' top stock picks to find out what they feel might have an attractive future outlook!

PS. Simply Wall St updates its DCF calculation for every Indian stock every day, so if you want to find the intrinsic value of any other stock just search here.

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.